The following is for the exclusive use of attorneys. This firm does not make any representations as to the accuracy or current status of any case cited herein.
This Motion is filed on an Ex Parte basis in that JPMorgan Chase Bank, N.A. (the “Defendant”) never filed a response to the Summons and Complaint or an appearance in the adversary matter. The request for relief herein is ministerial in nature Cusano v. Klein, 264 F.3d 936, 948 (9th Cir.2001) (“The mere reopening of a bankruptcy case is a ministerial act that ‘lacks independent legal significance and determines nothing with respect to the merits of the case.”) (citation omitted). Cause exists to file this motion on an ex parte basis and to grant the relief requested by the Plaintiffs herein. The Debtors’ motion is as follows:
Also, check out section 350 of the Code.
The following is an excellent article by another attorney. I like to give credit where credit is due – so I offer to you Mr. Blades insights. These also are true for Arizona residents.
Written by Rock Hill Bankruptcy Lawyer, Showell Blades
A client who has a good bankruptcy lawyer usually has a calm experience once the case is filed. The idea is to, as my mentor explained to me twenty years ago, disclose everything and fly under the radar. You do not want to do anything which draws unnecessary attention to your file or your fact situation so that your creditors or the United States Trustee’s office decides to take a closer look at the file. Even if nothing comes of that closer look, the process can be stressful for the clients.
Recently I had a woman storm out of my Rock Hill bankruptcy office after a free thirty-minute consultation which she ended by calling me an unpleasant orifice. My crime: I told her she had to wait four months to file bankruptcy and she wanted to file right then. She would best be served by remembering Ovid’s quote: “Bear patiently with a rival.”
The reason a client with a good bankruptcy attorney usually has a calm experience once the case is filed is because that attorney knows of the pitfalls that can come from taking simple actions, or by not taking them, before the case is filed. If all the bases are covered properly, there is nothing for anyone to scrutinize, or the client is at least prepared for those items which will come under closer scrutiny.
Be advised: the bankruptcy system can be a system where you encounter strong, well-funded and well-prepared rivals. Ovid’s advice can come in handy.
First, Debtors need to make sure that they do not have any deposits in any banks to which they owe money, whether in the form of CDs, checking or savings accounts, or other forms of deposits. This is because a bank has the right of setoff. If you file bankruptcy and owe a bank any money, then that bank has the right to administratively freeze the account and take the funds to pay the loan which you are not likely to pay in bankruptcy. For that reason, most good bankruptcy attorneys will make sure that you move your accounts to which you owe no funds so that you do not file bankruptcy and have your checking account frozen and all of the money that you would have going to pay bills that month disappear. You will not get it back. Also, keep in mind that many clients have automatic payroll deposits which need to be moved and drafts to pay important things like life and health insurance which need to be moved (both of which often take thirty days to change) .
Second, your attorney will ask you to whom you’ve paid payments on debts within the ninety days prior to filing bankruptcy and to whom you’ve paid payments on debts within the one year prior to filing bankruptcy if the lender was a family member. Take time to think about your answers. If you say “No one” and the bankruptcy trustee finds out that you have, then you have not told the truth which means you’ve committed at least three federal crimes. Additionally, any payment on a debt which qualifies as one of the above payment can be taken back by the trustee (preferential treatment) and given to the rest of your creditors. In other words, if you gave Aunt Zelda the $15,000 you owed her eight months ago and then you file bankruptcy, your bankruptcy trustee can sue Aunt Zelda to get all of the money back and will win causing her great concern because she probably doesn’t have it. Christmas will never be the same.
Also, if you paid the four mortgage payments you were behind all at once a month before you file bankruptcy and do not wait ninety-one days after that check clears, then the trustee may be able to get all of that money back from the mortgage company. You would find yourself in bankruptcy and still four mortgage payments behind which could put you in foreclosure. Tell your attorney about these things and expect to have to wait to file bankruptcy.
Third, if you are remotely thinking about filing bankruptcy or feel overwhelmed, but you have a 401(k) or IRA or a similar investment vehicle, and are thinking about solving your problems by cashing it in, DON’T. Go talk to a bankruptcy attorney and get some advice. This is for several reasons. Initially, you need to understand that your creditors cannot take that investment from you no matter how broke you are. It is exempt, protected from the reach of creditors or the bankruptcy trustee. So leave it alone. Don’t cave to the creditors’ threats and take what may be your last or only safe asset.
Another reason to consider disposing of this asset very carefully is this: I cannot tell you how many people I have seen who have cashed in their 401(k) and paid their credit cards down only to find themselves overwhelmed and now without their 401(k) still needing to file bankruptcy. Get advice before you try to pay off your debts with your 401(k). The only way I would advise that would be if you could pay off all of your debts in full, be able to handle any tax ramifications of cashing it in early, and be able to make it on your family budget after the debts are gone so that you do not find yourself upside down very soon so that cashing in the 401(k) was a waste.
Finally, if you cash in your 401(k) within the six months prior to filing bankruptcy, this could cause you to fail the Means Test. This is one of the things that the Court looks at to see if you qualify for bankruptcy and, if so, which type and what a payment would be if you filed a chapter 13. (This reason MAY have been negated by a Supreme Court decision that came out this week, but I wouldn’t want to be the first person to try to make sure of that). So talk to your attorney before you do it.
A fourth trap for the unwary is to renew loans or taking out loans prior to filing bankruptcy. You need to tell your attorney what you’ve done with your credit in the last six months or so. This is because creditors have the right to object to your discharging, or getting rid of, their debts. There are a number of reasons creditors can use to do this but one of them involves your borrowing money right before you file bankruptcy. What IS “right before filing bankruptcy” is not defined. I have had a creditor object to charges that were made four and a half months prior to my client filing bankruptcy. If this happens you have to pay me extra money to defend that lawsuit or you have to settle it by paying back the creditor. It can be avoided by figuring out when you last used credit, telling your attorney, and waiting to file. Renewals of loans before filing count also.
The fifth and final trap involves not making sure you know what your assets (your property) is worth. Your attorney is going to be asking you all kinds of questions. Many of them deal with the value of your house, your cars, your furniture, antiques, an other property. The Court expects you to know what they are worth. If you do not it could have bad results for you for several reasons.
Most of the reasons involve the trustee’s selling your stuff because he can make money by selling them, paying off the liens on them, paying you your share of the money (your exemption) and, if he still can make more money after all of that, it is his to use pay to your creditors. If you make sure that you have an accurate value for your assets, then it will be close to what a trustee could get by selling them and your attorney can claim the correct exemptions and protect your assets. Since sometimes you have to make choices about what you want to protect and what you don’t, knowing a good value is important.
Also, a recent U.S. Supreme Court opinion (“Schwab” exemption case) says that, if a debtor undervalued his assets when he claimed his exemptions and a trustee can sell them for more, the Debtor cannot get the money that the trustee made over the debtor’s exemption amount even if he could have claimed more but did not. Thus, you need to know the value so you can claim the full amount of protection.
Another reason value is important is that, in some cases, if your collateral is worth less than you owe, you can pay the value of the collateral to the creditor and not the larger amount that you owe. If you undervalue your stuff and file a motion to value and the property turns out to be worth close to what you owe, then you wasted everyone’s time and you and your attorney look stupid.
Finally, if you undervalue your assets and they turn out to be worth significantly more, not only could you lose them but you could find yourself being criminally prosecuted for bankruptcy fraud. This could happen even if you did not intentionally undervalue them; rather, you were too lazy or irresponsible to try to find out a good value. Debtors have the burden of investigating their affairs and reporting everything truthfully and completely to the Court.
In summary, there are many considerations which must be addressed before you file bankruptcy. Attorneys know that everyone who needs to file bankruptcy wants it done as soon as possible. However, it also is their job to help Debtors make the best decisions. Debtors must understand that sometimes they must fully apprise their attorneys of the facts and think about what they are telling their attorneys (and of what their attorneys are telling them). They also need to understand that, sometimes, they are going to have to be patient before they enter Bankruptcy World because the wolves are at the door.
A Chapter 7 bankruptcy is a tool to help individuals start over. Some of the information in this article is specific to cases filed in Arizona, but the majority is bankruptcy law and applies to all Chapter 7 bankruptcy. This basic information should assist you in understanding how bankruptcy works, but please understand that the information on this website is not all you need to know to file Chapter 7 bankruptcy. Video explaining chapter 7 basics.
Chapter 7 bankruptcy is designed to give an individual a “fresh start”. This includes eliminating or discharging all your unsecured debts after you have liquidated and paid to your creditors all of your non-exempt assets. Certain unsecured debts cannot be discharged in Chapter 7. Chapter 7 bankruptcy has no effect on secured debts. That means if you want to keep your home or car, and there are debts owing on that home or car, you need to keep the payments current.
A permanent resident of Arizona can file bankruptcy in the Arizona bankruptcy court. But, you must have lived in Arizona for at least half of the last 180 days (6 months) in order to file in Arizona.
An important concept in both Chapter 7 and Chapter 13 bankruptcy is “exemptions” or “exempt property.” When you file a Chapter 7 bankruptcy, the Chapter 7 Trustee takes all of your “non-exempt” property and sells it for the benefit of your unsecured creditors. The Trustee cannot take your exempt property and you may keep all of your exempt property regardless of its value and amount. What property is “exempt” and what property is “non-exempt” depends on the exemption laws of the applicable state. Each state has its own exemptions for bankruptcy purposes. For a link to Arizona exemptions go to the primary menu, Bankruptcy, Arizona Exemptions. There is a download PDF of the exemptions. Only Arizona residents are able to use Arizona exemptions (YouTube video).
Just because you are an Arizona resident when you file for bankruptcy does not mean you are entitled to Arizona exemptions in bankruptcy. Therefore, before you file bankruptcy you and your bankruptcy attorney must determine which state laws will determine your exempt assets. The state exemption law applicable to your bankruptcy is determined by the state in which you have been domiciled for the 730 days (two years) immediately prior to filing your bankruptcy. If you have not been a resident of Arizona for the two-year period before filing your bankruptcy, then your bankruptcy exemptions will be those allowed by the state in which you lived for 180 (6 months) days immediately before the two year period, or the state in which you lived for the longer portion of that 180-day period. Confused yet? I recommend making a diagram of where you lived and when.
For example: a person filing bankruptcy in Arizona today may use the Arizona property exemptions if he or she lived in Arizona for more than two years. But, if that person did not live in Arizona for two full years, then that person will need to look to the exemptions of the state where he or she lived in that last two years. It is possible that the exemptions of the prior state are limited to residents only. Therefore, the person filing for bankruptcy will need to use federal exemptions. In many cases, the state where the person moved from will provide better bankruptcy exemptions than Arizona law.
Consider John. John sells his residence in Georgia for $100,000 and moves to Arizona in January. In March of that year John purchases an Arizona homestead for $100,000; he gets an Arizona drivers license and registers to vote in Arizona. Then, 14 months after moving to Arizona, John loses his job and files bankruptcy. Under the bankruptcy law, Georgia’s relatively limited exemption laws would apply to John’s bankruptcy, and John would not have the benefit of Arizona $150,000 homestead protection.
The means test is a formula established by Congress to determine who may be eligible to file Chapter 7 bankruptcy. People under their state’s median income and people whose debts are primarily not consumer debts are exempt from means test qualification. This means if 51% or greater of the debts are related to business obligations then the potential debtor does not need to worry about the means test.
In the bankruptcy documents you list secured debts separately from unsecured debts. Unsecured debts include personal loans and credit cards issued by banks, such as Visa, MasterCard, American Express, or Discover, and other credit cards used to purchase consumable items. Vehicle leases, medical bills, and personal loans are also unsecured debts. Secured debts include those debts where the creditor has a security interest in your property to guarantee payment. Examples of secured debts include mortgages, car loans, loans from finance companies (usually secured by household items), furniture, computers or electronics. If you purchased goods at a store using a store credit card, such as a card from Home Depot, Best Buy, etc., the store probably has a security interest in certain items purchased, which makes the store a secured creditor.
After filing a Chapter 7 bankruptcy, you will have to choose to either reaffirm or redeem secured debts or surrender the secured items to the creditor. You are entitled to keep any secured property as long as you continue to pay the loan for that property in a timely manner. If, however, you elect to surrender secured property, the secured creditor may not sue you for and try to collect any money from you. Some mortgage companies recently have required borrowers to sign cross-collateralizated agreements. This means that the borrower agreed to allow their bank or savings union to seize their bank accounts in order to pay delinquent payments for the vehicle. If you are unsure whether you signed this type of documents, you should review the papers you signed when you purchased your vehicle and/or when you opened your account. You may want to move your money to a new bank before defaulting on a vehicle loan. Do not bank at Wells Fargo — they will freeze your account even if you did not sign a cross-collateralized agreement.
Your bankruptcy estate refers to your non-exempt assets that are subject to administration by the bankruptcy trustee. Exempt assets, such as your homestead and IRA, are not part of your bankruptcy estate.
The creditor (or you) must file a reaffirmation agreement for all secured personal property you want to retain within 60 days of the first scheduled meeting with the trustee (the meeting of creditors or 341 meeting). If you do not sign the reaffirmation agreement or redeem the property within 60 days, the automatic stay is lifted as to that property and the creditor is permitted to take all legal action allowable under the law to repossess the property. Signing a reaffirmation agreement means that you will be personally liable to pay the debts after your bankruptcy is over.
Your attorney may choose whether or not to sign your reaffirmation agreement. Issues such as negative disposable income, no concessions by the creditor as to principal or interest or the attorney believes there is a presumption of undue hardship. If your attorney does not “approve” reaffirmation, you must prepare and sign a Reaffirmation Agreement Explanation explaining why you now have the financial ability to pay a reaffirmed debt. The bankruptcy judge will review your explanation and either deny or approve the reaffirmation. The bankruptcy judge will deny reaffirmation if he believes that reaffirmation is not in your best interest for a “fresh start.”
If the reaffirmation is denied you still may be able to keep your property if payments are current, or you could request a hearing with the judge. If the court refuses to approve your reaffirmation many creditors will let you keep your property if maintain current payments. (A creditor usually will not provide a reaffirmation agreement if you are delinquent in your payments.)
The bankruptcy stay is the bankruptcy tool that stops creditors from contacting you in any way after you file bankruptcy. This could be a problem because the lender o your home or car may stop sending monthly statements. It is your responsibility to make sure you pay these debts on time, otherwise the lender may ask the court for permission to take your home or vehicle.
An executory contract is a legal term referring to an agreement between parties and an obligation due by at least one of the parties (such as a car lease or a residential lease). The most common example is a lease agreement for a car or a residence.
Chapter 7 bankruptcy permits the debtor, or the trustee, to assume or reject an executory contract. A debtor has to decide what to do about an executory contract before the court issues a bankruptcy discharge which usually happens about 90 days after filing.
An example of an executory contract is a vehicle lease. If the debtor does not want to keep the leased vehicle then he can surrender the vehicle to the leasing company and has no further liability. If the debtor wants to keep the vehicle then will need to assume the lease and keep the payments current. The debtor and creditor must sign the lease assumption, but it is not necessary for the judge to approve the lease assumption. If the debtor cannot make the lease payments the leasing company can repossess the car, but cannot sue the debtor for any deficiency.
A debtor’s tool in bankruptcy is to “redeem” secured personal property such as furniture, computers, automobiles, or other property purchased on credit. To redeem means to purchase the property from the secured lender at its current fair market value considering its age and condition. If the property is worth less than the secured debt then this may be a good option. The problem is that most redemptions require payment in full at the time the redemption is accepted or approved by the court..
Start with the understanding that student loans will not be discharged in a bankruptcy. But, there are always exceptions to every rule. In some circumstances student loans can be dischargeable if you can show that your loan payments impose “undue hardship.” This issue must be filed as a separate action within the bankruptcy. This separate action is called a adversary. You must appear before the bankruptcy judge with proof of your hardship. Most likely this will be hotly litigated by the student loan creditor. It is wise not to assume you will be one of the very few who receive a partial or full discharge for their student loan. Each bankruptcy judge, in each bankruptcy district, in each federal court has a different opinion what is an “undue hardship”.
Make certain you provide your attorney information about all liabilities, no matter how remote. List any claim that anyone might have against you even if you are certain that claim will never arise. If you are a co-debtor on a note, have personally guaranteed any debt, or are liable on any mortgage, the debt should be listed and explained in the bankruptcy. You also must list debts you dispute. This includes any past obligations to any mortgage companies for a foreclosed home or even a short sale, make sure to include any mortgage insurance company (such as a VA loan). You should also include any obligations that someone promised to pay for you, such as selling your home to someone who promised to pay you, but the sale was done without paying off the entire debt.
The discharge is the legal process that eliminates most of your legal liability to your creditors. Creditors who have been discharged in bankruptcy can never again try to collect debts that you incurred prior to filing bankruptcy. There are certain debts that remain even after the discharge is entered. These debts include child support, alimony, student loans, most taxes, and several other obligations. A good bankruptcy attorney can guide you as to what debts are discharged and what are not. Video explaining the discharge.
By Jon Alper, as edited by Diane L. Drain
Homeowner Association Receive Special Treatment in Bankruptcy
Homeowner Associations received special treatment in bankruptcy, based on both federal law and Arizona statutes. First, there is contract law – read your Conditions, Covenants and Restrictions “CC&R’S” to determine your liability. Most likely you are personally liable for the dues/assessments and the dues/assessments are liens on your property.
Here is an example: You live in a condo in Phoenix. You pay $300 a month for HOA dues/assessments. Unfortunately, you are behind in your payments for the last 3 months. This means you owed $900, plus interest and fines (as provided by the CC&RS). You just received notice that the HOA has assessed a $1,500 special assessment for the repairs to the common area; to be paid in three installments of $500 each over the next 6 months. The first payment is due immediately.
Let’s start the discussion with the premise that you want to keep the condo. Therefore, you need to make arrangements to pay the debt, including the fines provided by the CC&R’s. But, your neighbor just told you that you could file bankruptcy and eliminate those dues. This is partially true, but there are several twists and turns. Filing bankruptcy be a solution to your problem, but only a chapter 13. That type of bankruptcy will allow you to pay the HOA arrears over time, while you continue to pay all new dues/assessments current as they come due.
What your neighbor did not understand is that Arizona statutes provide that an automatic lien exists for any unpaid dues/assessments. So even if the dues/assessment was due and payable before the date the bankruptcy was filed, the lien would still attach to the condo. Thus, your personal obligation may be discharged, but there will still be a lien on the condo. The lien only lasts for 3 years, but the HOA can foreclose on the lien at any point prior. So, if you want to keep the condo you have to pay the assessment, or risk a foreclosure.
Now we change the premise that you do not wish to keep the condo. Depending on the CC&R’s both your and your property are “liable” for the debts so long as you own the condo. If you file a bankruptcy, the assessments, fines and interest that accrued before the filing of the bankruptcy will be discharged (the HOA cannot pursue you personally, but can foreclose on the condo). The problem is you still own the condo until the lender completes the foreclosure. So if you file for bankruptcy before the foreclosure is completed then under the bankruptcy law (11 U.S.C. 523(a)(16)) you are responsible for the new dues/assessments that arise after the date your bankruptcy was filed. Therefore, it is best to file your bankruptcy after the foreclosure is complete and the condo is no longer in your name.
Back to the fact pattern above: if you intend on surrendering the condo, the first part of the special assessment will be discharged in your bankruptcy. But all the new dues/assessments, including the the next two installments of the special assessment, are still your responsibility. If you did not pay this before the foreclosure completes and legal title transfers, the HOA can sue you, and collect on any judgment obtained. It is best to talk to a good bankruptcy attorney with expertise in real estate matters. Not many bankruptcy attorneys also have real estate experience. Diane Drain does – she has taught both areas of law since 1990. Feel free to call our office if you would like help.
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Creditor repossesses car and Customer subsequently files Bankruptcy –
Does the Creditor Really have to immediately give the car back to the Debtor/Customer
The law applicable in bankruptcy cases in Florida allows an auto lender to retain and sell a vehicle lawfully repossessed pre-petition where the customer subsequently files bankruptcy. In Bell-Tel Federal Credit Union (In re Kalter), 292 F.3d 1350 (11th Cir. 2002). This is an exception, because in most jurisdictions a secured creditor which repossesses a car pre-petition must return the car to the debtor after a bankruptcy filing. A common question by creditors in this situation is what conditions, if any, can be imposed before returning the car to the debtor.
Most creditors believe the debtor must first provide evidence of insurance or some other form of “adequate protection” before the creditor has to return the vehicle. In a recent decision, however, the Second Circuit Court of Appeals found that a creditor cannot put conditions on returning a car once the debtor files Chapter 13.
In In re Weber, 719 F.3d 72 (2nd Cir. May 8, 2013), the creditor lawfully repossessed the car. Four days later, the customer filed Chapter 13 and his attorney sent written notice to the creditor requesting the car’s return. After a week the creditor failed to return the car, so the debtor filed an adversary action against the creditor for turnover and sanctions. After an order to show cause hearing, the car was returned to the debtor. At the show cause hearing, the creditor argued that it relied on a 2001 New York District Court opinion (In re Alberto, 271 B.R. 223 (N.D. N.Y. 2001)), which provided the creditor with a reasonable basis for declining to release the vehicle absent a court order issued pursuant to a turnover action under Bankruptcy Code Section 542. The Bankruptcy Court considered but denied the debtor’s request for sanctions, relying on the Alberto case. On appeal, the District Court reversed and found that the creditor had violated the automatic stay. On further appeal, the Second Circuit affirmed the finding of a violation of the stay. The Second Circuit in Weber found the following –
1. the secured creditor was required to deliver the car back to the trustee or debtor-in-possession promptly after receiving notice that the debtor filed Chapter 13.
2. the secured creditor’s refusal to return the vehicle to the debtor promptly upon learning of his
Chapter 13 filing constituted a willful and unlawful exercise of control over the property of the estate in violation of the automatic stay, and the creditor was liable for damages, costs and attorneys fees.
3. the secured creditor’s belief that the Chapter 13 debtor had not provided “adequate protection” for the creditor’s security interest in the debtor’s car did not excuse the creditor’s violation of automatic stay for failing to promptly return the repossessed car upon learning of the debtor’s Chapter 13 filing.
The Weber case suggests that auto lenders should take a very conservative approach in these situations, and not withhold the return of a vehicle lawfully repossessed pre-petition upon receiving notice of a Chapter 13 filing. A few take-away from the Weber case for most jurisdictions (this would not apply to Florida cases) –
1. Does the creditor have to give the car back to the debtor upon learning of a Chapter 13 bankruptcy filing? Yes
2. How Soon? Promptly
3. Should the creditor wait until the debtor asks for the car back? No; however, the creditor should always ask whether the debtor actually wants the car back (because he may not)
4. Should the creditor wait until the debtor files a motion for turnover before giving back the car? No
5. Should the creditor wait until it receives evidence that the vehicle is insured, or other “adequate protection” before returning the car? No, not according to the Weber case 6. What if the debtor was a skip, had not paid in several months, or had been arrested in the car – can the creditor do anything to avoid returning the car? Yes, the creditor can immediately file a Motion for relief from the automatic stay, set forth the reasons, and request an expedited or emergency hearing. There is no guaranty, however, that filing the Motion will completely protect the creditor from a sanctions motion
7. Should the creditor rely on a bankruptcy court or even a district court case in the jurisdiction which states the creditor does not have to immediately return the car to the debtor? According to the Weber case, relying on such a case may later be found to be a mistake.
8. Can the creditor take time to first consult with an attorney before returning the car to the debtor? Yes; however, the creditor must act within a reasonable period of time after receiving notice of the bankruptcy filing. See In re Makowski, 2013 WL 2154788 (Bankr. D. Alaska 2013)
9. What if the creditor has knowledge of the bankruptcy filing, but the car is nevertheless sold by mistake at auction? Big trouble. See In re Carlton, 2013 WL 2297082 (Bankr. E.D. N.C. 2013)(creditor had knowledge of bankruptcy filing, but due to a mistake in their system allowed car to be sold at auction. Court awarded sanctions totaling $24,000)
10. Is the answer different in a chapter 7 case, as opposed to a chapter 11 or chapter 13 case? Maybe. Since the Chapter 7 trustee arguably is the party in interest, and not the debtor, you should contact the Chapter 7 trustee and your bankruptcy counsel in this situation
Three recent cases illustrate this issue –
In re Castillo, 456 B.R. 719 (Bankr. N.D. Ga. 2011)
1/3 – Repo
1/7 – BK filed
1/13 – Demand for return of car
1/13 – Creditor advises debtor it wants proof of the bankruptcy filing and proof of insurance
1/15 – Creditor receives copy of the petition as proof of the bankruptcy filing
1/20 – Debtor files a Motion for Sanctions
1/27 – Hearing on Motion for Sanctions
2/3 – Debtor picks up car
The Court in In re Castillo held that the creditor violated the automatic stay by refusing to return the car upon the debtor’s request. The Court stated that a creditor cannot unilaterally decide whether a debtor’s proposed Chapter 13 Plan provides adequate protection. Under the Code, a creditor is required to file a Motion for adequate protection (which is determined by the Court). The creditor can file an emergency motion. The creditor cannot hold the car and force the debtor to take action (i.e. file a motion for turnover). The Court awarded the debtor sanctions in the amount of $1,600 in actual damages, plus attorneys fees.
In re Makowski, 2013 WL 2154788 (Bankr. D. Alaska 2013)
10/4 – Repo
10/11 – BK filed
10/11 – Demand for return of car
10/12 – Creditor advises debtor it wants to consult counsel, and is given an extension to 10/15
10/15 – Creditor tells debtor’s atty they will not release the car
10/15 – Debtor files a Motion for Sanctions
10/15 – Creditor releases car
In In re Makowski, the creditor ultimately returned the car to the debtor, but the issue was whether the creditor did so timely. The Court described timely as “within a reasonable period of time after notice of bankruptcy.” The Court noted cases which recognize that there is no bright line to define how quickly a creditor must release a hold on collateral, and the answer will depend on the circumstances of each case. The Court stated “It is incumbent upon the creditor to release its lien without delay as soon as it is aware of the bankruptcy and of the legal effects of that bankruptcy. Naturally this Court would not chastise a creditor for seeking legal counsel before it acts. But any delay in obtaining that legal advice is unwarranted and a violation of the stay.” While the Court found taking four days to consult with counsel was reasonable, once the creditor advised the debtor’s attorney that the car would not be returned, the creditor had willfully violated the automatic stay by exercising control over property of the estate. The Court was not impressed with the argument that the car was returned the same day, since that occurred only after the debtor filed a Motion for sanctions.
In re Stephens, 495 B.R. 608 (Bankr. D. Ga. 2013)
2/12 – repo.
2/15 – filed Chapter 13 case
2/15 – debtor’s attorney notified creditor, Guaranteed Auto
2/18 – attorney called creditor, advised of bankruptcy filing and requested return of the car
2/18 – creditor demands proof of full insurance coverage
2/19 – fax to creditor which included notice of the bankruptcy filing and proof of insurance 2/20 –
2/ 20 – creditor advised debtor’s the attorney that it would not return the vehicle because it had been repossessed before the Chapter 13 filing. Debtor’s counsel urged Mr. Hart to consult a bankruptcy attorney.
2/20 – debtor filed adversary against Guaranteed Auto, asserting a violation of the automatic stay and seeking turnover of the car.
2/20 – Court set an emergency hearing for 2/26 (copies of the complaint and notice of the hearing were sent by mail, facsimile, and hand delivery).
2/25 – creditor advised that it sold the car on 2/24
2/26 – creditor appears at hearing without an attorney, and hearing is continued.
After the continued hearing, the Court held that the creditor willfully violated the automatic stay by refusing to return the car, demanding proof of insurance without moving for an order requiring adequate protection, and ultimately selling the vehicle before the Court’s emergency hearing. The Court awarded $1,559 as actual damages, $4,325 as attorney fees, and punitive damages in the amount of $17,890 (i.e. twice the amount of the scheduled debt) based on the egregious nature of the stay violations.
HICKS v. E. T. LEGG & ASSOCIATES (05/25/01 – No. D034398) Civil Code 2924c(e), and 2924g(d) do not prohibit the postponement of a foreclosure sale for successive periods of five of fewer business days during the period a sale is on hold because of an injunction or bankruptcy stay.
Bankruptcy of Wytch, USBAP 9th, Nos. 97-1089 and 79-1145, 7/1/98: 11 U.S.C. Section 349(b) does reinstate a debtor’s prepetition property rights by invalidating specified bankruptcy court orders, Section 349(b) does not vacate orders for relief from the automatic stay under 11 U.S.C. Section 362(d). real property sold 2 hours after BK filed (chapter 7) property purchased by TP with no knowledge of BK, LR brought action to annul stay, no objection , relief granted. Case inadvertently dismissed, then reinstated, DR’s argued that set aside earlier Order lifting stay – BK Court and BAP did not agree – Order lifting stay stands.
In re SNTL Corp., 571 F.3d 826, Bankr. L. Rep. ¶ 81,515 (9th Cir., June 23, 2009), pages 154, 183 (case no. 08-60001) The Ninth Circuit Court of Appeals, in a unanimous panel decision, affirmed, and adopted as its own, In re SNTL Corp., 380 B.R. 204 (9th Cir. B.A.P. 2007), holding that an unsecured creditor may include, as part of its claim, attorney’s fees incurred postpetition but based on a prepetition contract. The opinion reasoned that (1) Code § 506(b), permitting an oversecured creditor to recover postpetition attorney’s fees, speaks only to the secured status of a claim, and not to its allowability; (2) the claim for attorney’s fees exists on the petition date, although it is contingent and unliquidated, as the “right to payment” exists on the petition date; thus, the claim is not disallowed under Code § 502(b)(1), requiring a bankruptcy court to “determine the amount of such claim … as of the date of the filing of the petition”; and (3) neither United Sav. Ass’n of Texas v. Timbers of Inwood Forest Associates, Ltd., 484 U.S. 365, 108 S. Ct. 626, 98 L. Ed. 2d 740 (1988) (holding that an undersecured creditor could not receive postpetition interest on the unsecured portion of its debt) nor public policy mandated disallowance of such a claim.